Societe Generale, one of the most bearish commentators on
crops ahead of the autumn drop in prices, renewed a forecast of falling corn futures,
saying that demand from livestock feeders was not as resilient as it appeared.

A bigger-than-expected drop in US corn inventories in the three
months to December 1, which has been a major support to prices, has been widely
attributed to demand from livestock feeders proving more resilient than had
been thought.

Consumption by other major sources, ethanol plants and
importers, is more easily tracked on a week-by-week basis.

However, closer analysis suggests that "rationing is indeed
occurring in this [livestock] demand category" too, undermining the case for
higher corn prices.

Delayed impact

Demand for feed from cattle feedlots, which typically house
animals for six months, looks set for a decline as the impact of falling rates since
August of take-ins of animals for fattening feeds through.

"It stands to reason that a more pronounced drop in feed
usage will be observed later in the marketing year, particularly in the March-to-May
and June-to-August quarters," SocGen analyst Christopher Narayanan said.

In poultry, "chick placements are expected to continue at
muted levels", without an additional rise in chicken prices to offset higher
feed costs.

'Biological lag'

Meanwhile, in the pork sector, while "efficiency gains have
helped keep production high, lower feed demand from the hog industry over the
last few years has been a key theme.

"The breeding herd remains historically low, as producers
have cut back since the high grain prices seen in 2008," Mr Narayanan said,
forecasting "continued rationing in the hog industry".

While livestock producers may have been slower to ration
corn than importers or ethanol producers, "we maintain that the biological lag
involved in raising animals is the root cause of this seemingly slow response,"
he said.

"Barring any repeat of last year's supply shocks in either
South or North America, we continue to expect corn prices to trend lower into
year-end."

'No evidence of
reduced feeding'

The comments contrast with some other observations of
livestock demand for corn.

RJ O'Brien analyst Richard Feltes said that "in the critical
feed sector, we don't have any evidence of reduced feeding, given a slight
uptick in poultry numbers and anecdotal reports of stable-to-higher hog
production, in addition to ongoing high rates of domestic meal usage".

The US Department of Agriculture in a report last week highlighted
elevated cow liquidation rates - which are close to the 25-year high 17.1% of
inventory reached in 2011 - and flagged a small decline in chicks placed for
growing into broiler chickens.

However, it highlighted as an "important" finding "that US [pig]
breeding inventories have not declined, despite very high feed costs.

"In the current market environment of high feed costs, the
breeding herd could have been expected to decline," USDA analyst Rachel Johnson
said.

"The fact that it did not suggests that pork producers are
assuming that high feed costs are temporary, and that pork demand in 2013 will
continue strong."